Friday, June 3, 2011

Groupon's 50% Myth -- Shattered

Groupon filed to go public yesterday, offering fans, critics, and investors a neat glimpse into the deal-sniffing giant's gooey guts.

Did you know that just 15.8 million of its 83.1 million subscribers have actually bought a Groupon? Well, you do now.

However, the real nugget here for those following Groupon as a business model is the divulging of exactly how much it keeps. The Groupon pitch is simple. Ideally it takes as much as 50% of any deal offered, and it pays the balance to the merchant over three months. In some cases it can be even more (as in small deals like $4 for $8 worth of candy or frozen yogurt -- where Groupon requests to keep the entire voucher value to make it worth its while).

Well, now we know that Groupon kept 39% of the $713.4 million it sold last year. The percentage crept up to 42% during the first three months of 2011, and we'll keep watching that to see which way the money is moving.

If you have the time, Groupon's prospectus is an enlightening read regardless of your financial expertise.